1. Field of the Invention
The present invention relates to financial business systems and, more specifically, to data processing apparatus for controlling risk in a multiple account system.
2. Description of the Prior Art
Currently, risk in the banking industry is controlled in an ad hoc fashion on an account-by-account basis. The fundamental element of risk is exposure, the amount of funds disbursed by the bank in excess of the funds held by the bank for a given account or group of accounts. When a bank receives a request for a transaction from a corporate customer, the bank's computer system examines the account to which the resulting transaction would be posted, if allowed, and determines if the exposure resulting from the transaction would exceed a predetermined exposure limit for that account. If the exposure limit would be exceeded, the computer system alerts an account officer who then decides whether to authorize the transaction. The officer's decision may be based on several factors, including past experience with the customer, an understanding of the context of the transaction request and a knowledge of the customer's other accounts.
If the officer desires knowledge of the customer's other accounts, he or she must access each of the accounts individually and tally up the balances (and exposures) for each account. While the officer is deciding whether to authorize the transaction, new transactions may be received by these other accounts, thereby changing the overall exposure of the customer and causing the officer's decision to be based on obsolete information.
Furthermore, banks usually assign exposure limits to each account on an individual basis. If a customer's overall exposure is relatively low, yet the exposure limit for one of its accounts is exceeded, the bank might deny a requested transaction to that account. In this situation, the bank's risk in otherwise allowing the transaction would be relatively low, yet the bank would lose the profits it would have made on the transaction and would also lose the goodwill of the customer. Therefore, with some customers it is desirable to assign relatively high exposure limits for the customer's individual accounts and an overall exposure limit for all of the customer's accounts taken together that is less than the sum of the exposure limits for each individual account. In this way, a customer could request a transaction that would increase the exposure to one account beyond the ordinary exposure limit for that account, yet the transaction could still be authorized if the overall exposure limit were not exceeded.
Implementing such a system on an ad hoc basis would be difficult, however, because corporate customers frequently maintain several, even hundreds, of accounts with a given bank. The amount of work involved for an account officer to tally the customer's total exposure is overwhelming and the risk of making costly mistakes, either to the bank or to the customer, would make such a system difficult.
It is also useful for banks to be able to track exposure and other conditions in groups of accounts in order to spot fraud and to identify industry trends. If apparently normal sums are withdrawn from many accounts belonging to a customer by the same type of payment system, it may indicate that the individual is involved in embezzlement or some other type of fraud. Similarly, if several customers in a single industry request similar transactions at the same time, it might indicate an important industry trend that could affect the bank. Tracking groups of accounts to spot these trends is almost impossible if done on an ad hoc basis, and no system currently provides an automatic means for tracking these types of trends.
Also, because of recent changes in Federal banking regulations, banks need to have the ability to assess charges for the use of daylight overdraft (DOD) funds. DOD funds are funds used by a customer in excess of funds in the account during a given banking day. Typical corporate customers use daylight overdraft funds to allow them to carry on business without having to keep a large amount of inactive funds on hand at a bank to cover all of the transactions that may occur during a single day. The corporation will essentially borrow DOD funds and provide funds to cover the DOD usage by the end of the day. Currently, because of the difficulty of tracking DOD usage, banks are unable to assess charges for DOD usage.
Many types of transactions occur throughout the processing day where the transaction is known at a given time, but does not become effective until a later time. This is known as a value dated transaction (VDT) because the transaction has no financial value to the target account until the time specified. One example of a VDT is a direct deposit payroll transaction, where the transaction is reported to the bank prior to the settlement of the transaction. Currently, many banks will process VDT's upon receipt, posting funds to the account prior to settlement. This situation ties up bank funds in an unproductive waiting cycle. Furthermore, even if the bank does not process VDT's upon receipt, it would be useful to the bank to track the projected exposure caused by the VDT prior to the actual settlement of the transaction.
U.S. Pat. No. 4,346,442, issued to Musmanno, discloses a data processing system for securities brokerage and cash management that supervises, implements and coordinates a margin securities brokerage account, short term money market funds and subscriber-initiated use of electronically responsive credit/debit media and checking systems. Subscriber expenditures, effected as by charge card use, check and cash advance, are applied on a hierarchal basis against the subscriber's free credit balance, short term investment and the lendable equity of his securities account. On a periodic basis, received card charges, check, securities and deposit transactions for the ensemble of account participants are verified and employed to compute an updated credit limit for each subscriber. The transactional data is reviewed against predetermined norms to detect abuses. The short term investment position of each account is modified as necessary to permit money market or comparable earned yields on the account free credit cash balance.
U.S. Pat. No. 4,823,264, issued to Deming, discloses an electronic funds transfer system that assures that funds to be electronically transferred are actually present to be transferred. This is accomplished by sending both the debit side and the credit side of the transaction as described in automated clearing house records to a payor's financial institution or data processor and comparing both records to assure the funds are present before releasing the funds to a payee.
None of the above-described references disclose a system for controlling risk in the banking industry among related corporate accounts. Nor do they make any provision for charging for the use of daylight overdraft funds.